Commercial Bank reports net profit of QR402m for Q1

٤٠٢ مليون ريال أرباح البنك التجاري خلال الربع الأول

The Commercial Bank, its subsidiaries and associates (Group) announced reported a net profit of QR402m for the first quarter of 2020, as compared to QR440m for the same period in 2019. The bank’s operating profit rose by 17.5 percent to QR730m.

Sheikh Abdulla bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, “Qatar has again demonstrated its resilience and agility as it joins the international community in the fight against COVID-19. The government and Qatar Central Bank have introduced a raft of measures, including a QR75bn stimulus package for the private sector and allocating QR 3bn to local banks as guarantees to ease liquidity and back the economic and finance sectors.

“Commercial Bank, with its strong balance sheet and market leading expertise, is committed to supporting the private sector during these challenging times and is adhering to all the government directives to contain the spread of COVID-19.” Hussain Alfardan, Commercial Bank’s Vice Chairman, added, “Our current top priority is the health and wellbeing of our employees and customers, while ensuring business continuity and service delivery. To that effect we have instituted several measures across our business lines including splitting critical functions across multiple locations, working from home in compliance with the government’s directives, temperature screenings at our offices and select branches remaining open to provide crucial banking services for customers.

“Technology, particularly during these times, continues to perform a vital role in the Bank. Our early investments in the Bank’s digital platforms, such as our 60 seconds online remittances and remote cheque deposits, have enabled us to better serve our customers remotely whilst the digitization of our internal processes have allowed us to seamlessly transition to working from home.” Net interest income for the Group increased by 39.3 percent to QR809m for the quarter ended 31 March 2020 compared to QR581m achieved in the same period in 2019. Net interest margin increased to 2.5 percent, compared to 2.0 percent achieved in the same period in 2019. Although asset yields have reduced, the increase in margins is mainly due to proactive management of the cost of funding both in Qatar as well as Turkey.

Non-interest income for the Group decreased by 69.2 percent to QR 98m for the quarter ended 31 March 2020 compared with QR319m achieved in the same period in 2019. The overall decrease in non-interest income was mainly due to an adverse unrealized mark to market movement in investment and trading income as a result of the unprecedented volatility in the global markets.

Total operating expenses reduced by 37 percent to QR177m for the Q1, 2020, compared with QR278m from a year ago. Reduction in cost was mainly due to the IFRS 2 impact of the performance rights scheme due to the movement in the CB share price.

The Group’s net provisions for loans and advances decreased by 9.2 percent to QR188m for the quarter, from QR207m in the same period in 2019. The non-performing loan (NPL) ratio reduced to 5.0 percent in Q1 2020 compared to 5.6 percent in Q1 2019. The loan coverage ratio has increased to 84.6 percent in Q1 2020 compared to 80.3 percent in Q1 2019.

The Group balance sheet has increased by 2 percent with total assets at QR146.4bn. The increase was mainly in balances to banks, investments and loans and advances.

The Group’s loans and advances to customers increased by 3.2 percent to QR88.8bn. The increase was mainly in the government and services sectors. Investment securities increased by 13.9 percent to QR26.2bn in Q1 2020 compared with QR23bbn in Q1 2019. The increase is mainly in Government bonds.

Joseph Abraham, Commercial Bank’s Group Chief Executive Officer, commented, “Commercial Bank has implemented a large number of measures to protect the health and safety of our customers and employees, while continuing to support our customers during this challenging time. Enhanced hygiene procedures are in place throughout our offices and branches in line with official guidance and we have quickly enabled remote working, with 80 percent of staff and management currently working from home whilst we remain fully operational for all transactions.

“For our retail customers, the ongoing execution of our 5-year strategic plan in terms of digitization has placed Commercial Bank in a strong position to navigate the challenges posed by the COVID-19 pandemic by enabling our customers to self-service and transact remotely away from branches. We have waived fees on remittances and launched CB Smart payroll; a digital payroll and remittance service for both company and household workers.

“To support our corporate customers and the economy, we have postponed loan installments and interest payments for our SME clients and other corporates from affected sectors for six months, while a number of SME clients in particularly affected sectors such as tourism, entertainment and education are receiving concessionary interest rates for six months. We are also fully supporting the QDB initiative to provide loans at concessionary rates to cover companies for wages and rentals during this current period.” The volatility in the markets impacted the net profit for the first quarter, which was down 8.5 percent compared to the same period last year. Net profit before associates and taxes increased by 35 percent to QR542m during the period, supported by an expansion in NIMs and reduced net loan provisioning.

Abraham said the operating income for Q1 2020 reached QR907m, increasing by 1.0 percent compared to the same period last year, as the market sell off in the wake of COVID-19 resulted in mark to market impacts in our investment portfolio, causing a 69 percent reduction in total fee and other income during the period to QR98m. The bank expects much of this to be recovered as the markets retrace and we have already seen positive impacts in April as the market recovers.

Commercial Bank’s net loan provisioning declined 9.2percent during the first quarter of 2020 compared to the same period last year, supported by improved asset quality, contributing to the growth of our bottom line. The bank has added the impacts of COVID-19 into its risk models and have factored this into our provisioning though the full extent of the COVID-19 will be seen as events unfold in the second and third quarters, however the bank will continue to manage the situation dynamically, the Group CEO said.

The bank’s loans and advances were QR88.8bn at the end of the first quarter of 2020, up 3.2 percent compared to the same quarter in the previous year and customer deposits decreased 5.7 percent to QR77.4bn. However, supported by the success of our Transaction Banking services, low-cost deposits grew on an average basis by 15 percent in Q1 2020 compared with Q1 2019, contributing to the improvement in NIMs.

In Q1 2020, Commercial Bank completed the sale of Treasury shares in line with QFMA approvals and the resultant profit of QR111m has been accounted in equity in line with IFRS reporting requirements.

Alternatif Bank reported a good set of results despite challenging market conditions and the depreciation of the Turkish lira by circa 15 percent. The bank reported an increase in net profit to QR25 million, up 12 percent compared to the same period in the previous year, as net loan provisioning decreased 26 percent. Alternatif Bank’s customer deposits increased by 3 percent while loans and advances increased by 1 percent, compared to the same period previous year.